U.S. Xpress Enterprises, Inc. (NYSE: USX) today announced a
realignment plan focused on improving operating profitability and
cash flow as well as reducing balance sheet leverage.
Highlights
- The Company’s realignment plan is primarily focused on
improving its Over-the-road (OTR) operations with limited impact to
its Dedicated and Brokerage businesses
- Total costs expected to be reduced by approximately $25.0
million on an annualized basis beginning in the fourth quarter of
2022 based on actions already taken
- Disciplined capital allocation program designed to reduce
overall debt levels through a combination of trade cycle
management, reduction of IT development costs, and sale proceeds
from non-core real estate holdings, driving enhanced cash flow
generation in 2023
Company Comments
“Today's announcement is in the long-term best interests of U.S.
Xpress. Our vision to build a digitally enabled OTR fleet was
ambitious and achieved certain successes, but with the freight
market softening, it is important that we right size our cost
structure for the current environment to protect our corporate
health, our commitments to our customers, and our stockholders’
investment," said Eric Fuller, President & CEO. "The
investments we made in our digital enablement initiatives over the
last few years will be incorporated into our newly realigned
divisions. Our business will comprise two divisions: Dedicated and
Highway Services. Dedicated will continue to operate as it does
currently, while Highway Services will encompass our legacy OTR,
Variant, and Brokerage operations. We believe this model will allow
for the optimal allocation of all available OTR freight across
Company and third-party capacity, allowing selectivity for our
assets while providing additional capacity for our customers."
Organizational Realignment
Justin Harness will lead both the operational and commercial
functions of the OTR and Brokerage businesses, serving as President
of Highway Services.
Brandon Danneffel who most recently served as Senior Vice
President of Brokerage, will replace Mr. Harness, as the President
of Dedicated. Prior to joining U.S. Xpress, Mr. Danneffel worked at
Whirlpool Corporation where he held roles of increasing
responsibility across operations, merchandising, sales, and
marketing.
Mr. Fuller commented, "Justin led the turnaround of our
Dedicated division over the last year and a half and will assume
overall responsibility for the newly created Highway Services
division. We believe Brandon’s experience will be invaluable in the
Dedicated division, where strong performance requires close
partnerships with customers. The priorities of our Dedicated and
Brokerage businesses will not change with today's
announcement."
Mr. Fuller noted, “Our goal is to make the realignment as
seamless as possible for our customers and professional drivers. We
are focused on improving capacity, cost and service levels for our
customers, and our realignment plans are not anticipated to impact
the ability of our professional drivers to service our customers.
Behind the scenes, we expect to gain benefits from improved network
planning as well as more effectively allocating freight between
Company and third-party assets and the cost reduction measures, we
are undertaking."
Financial Impact
As part of the realignment plan, the Company has identified
significant personnel efficiencies as a result of eliminating
organizational overlaps and duplicative functions. In total, these
efficiencies are expected to reduce annualized wage costs by
approximately $20.0 million beginning in the fourth quarter of
2022. The Company expects to incur severance related charges due to
this workforce reduction initiative of $0.6 million in its third
quarter financial results.
In connection with this workforce reduction initiative and the
ongoing impact of remote work, the Company is undergoing a real
estate footprint rationalization focused on divestitures of
non-core real estate holdings. During the third quarter, the
Company terminated the lease agreement for its Atlanta office and
expects to incur a charge of $1.2 million related to this action in
its third quarter financial results. The Company expects to
generate annualized savings of approximately $2.0 million from the
lease termination beginning in the fourth quarter. The Company is
reviewing additional divestiture opportunities in its real estate
portfolio with the intent to use any proceeds from these
divestitures to pay down outstanding debt.
Finally, the Company has eliminated approximately $3.0 million
in additional annualized costs from all other areas of the
business. In total, with the combination of personnel savings,
savings from the real estate consolidation, and other cost
reductions just mentioned, the Company has eliminated approximately
$25.0 million in annualized costs.
Liquidity Update
The Company’s liquidity (cash balances plus availability under
the Company’s revolving credit facility) remains strong, at greater
than $135.0 million as of August 31, 2022, and the Company expects
its liquidity to improve over the balance of the year.
Guidance
The Company is experiencing an increase in insurance and claims
expense as claim settlements have accelerated and courts work to
clear the backlog of cases which were delayed during the pandemic.
Based on the quarter-to-date, the Company expects approximately
$15.0 million in additional insurance and claims expense, primarily
driven by one large claim, in its third quarter financial results
as compared to its 2022 second quarter financial results.
The Company continues to expect capital expenditures, net of
proceeds to be approximately $150.0 million for 2022. However, the
Company is targeting net capital expenditures of less than $100
million for 2023 as it implements a revised trade cycle management
initiative and reduces software development costs. The 2023 net
capital expenditure expectation assumes scheduled deliveries and
trades for the balance of 2022 remain on schedule.
The Company continues to expect $18 million of interest expense
for the full year 2022.
Conference Call
Information
The Company plans to host a conference call and simultaneous
webcast at 8:30 a.m. ET tomorrow morning (September 8, 2022) to
discuss its realignment plans in more detail. The conference call
can be accessed live by dialing 1-877-423-9813 or, for
international callers, 1-201-689-8573 and asking to be joined to
the US Xpress Realignment Plan conference call. The simultaneous
webcast can be accessed on the Investor Relations website at
investor.usxpress.com.
Forward-Looking Statements
This press release contains certain statements that may be
considered forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, and such
statements are subject to the safe harbor created by those sections
and the Private Securities Litigation Reform Act of 1995, as
amended. Such statements may be identified by their use of terms or
phrases such as "expects," "estimates," "projects," "believes,"
"anticipates," "plans," "intends," “outlook,” “strategy,”
“optimistic,” “will,” “could,” “should,” “may,” “focus,” “seek,”
“potential,” “continue,” “goal,” “target,” “objective,” derivations
thereof, and similar terms and phrases. In this press release, such
statements may include, but are not limited to, statements in the
"Guidance" section, statements regarding cost reductions, capital
allocation, division realignment, anticipated efficiencies from
such realignment, severance costs, lease termination costs, future
divestitures of real estate and the use of proceeds therefrom, and
any other statements concerning: any projections of earnings,
revenues, cash flows, capital expenditures, compliance with
financial covenants, or other financial items; any statement of
plans, strategies, or objectives for future operations; any
statements regarding future economic or industry conditions or
performance; and any statements of belief and any statements of
assumptions underlying any of the foregoing. Forward-looking
statements are based upon the current beliefs and expectations of
our management and are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified,
which could cause future events and actual results to differ
materially from those set forth in, contemplated by, or underlying
the forward-looking statements. The following factors, among
others, could cause actual results to differ materially from those
in the forward-looking statements: general economic conditions,
including inflation and consumer spending; political conditions and
regulations, including future changes thereto; changes in tax laws
or in their interpretations and changes in tax rates; future
insurance and claims experience, including adverse changes in
claims experience and loss development factors, or additional
changes in management's estimates of liability based upon such
experience and development factors that cause our expectations of
insurance and claims expense to be inaccurate or otherwise impacts
our results; impact of pending or future legal proceedings; future
market for used revenue equipment and real estate; future revenue
equipment prices and availability; future capital expenditures,
including equipment purchasing and leasing plans and equipment
turnover (including expected trade-ins); fleet age; future
depreciation and amortization; changes in management’s estimates of
the need for new tractors and trailers; future ability to generate
sufficient cash from operations and obtain financing on favorable
terms to meet our significant ongoing capital requirements; our
ability to maintain compliance with the provisions of our credit
agreement; freight environment, including freight demand, rates,
capacity, and volumes; future asset utilization; loss of one or
more of our major customers; our ability to renew dedicated service
offering contracts on the terms and schedule we expect; surplus
inventories, recessionary economic cycles, and downturns in
customers' business cycles; strikes, work slowdowns, or work
stoppages at the Company, customers, ports, or other shipping
related facilities; increases or rapid fluctuations in fuel prices,
as well as fluctuations in surcharge collection, including, but not
limited to, changes in customer fuel surcharge policies and
increases in fuel surcharge bases by customers; interest rates,
fuel taxes, tolls, and license and registration fees; increases in
compensation for and difficulty in attracting and retaining
qualified professional drivers and independent contractors;
independent contractors we contract could be deemed by regulators
or the judicial process to be employees; seasonal factors such as
harsh weather conditions that increase operating costs; competition
from trucking, rail, intermodal, and brokerage (including digital
brokerage) competitors; changes in regulatory requirements that
increase costs, decrease efficiency, or reduce the availability of
drivers; safety-related evaluations and rankings under the Federal
Motor Carrier Safety Administration’s Compliance, Safety,
Accountability program; increasing attention on environmental,
social and governance matters; future safety performance; our
ability to reduce, or control increases in, operating costs; future
third-party service provider relationships and availability;
execution of the Company’s current business strategy or changes in
the Company’s business strategy; the ability of the Company’s
infrastructure to support future organic or inorganic growth; our
ability to identify acceptable acquisition candidates, consummate
acquisitions, and integrate acquired operations; our ability to
adapt to changing market conditions and technologies, including the
future use of autonomous tractors; disruptions to our information
technology; the cost of and our ability to effectively and
efficiently implement technology initiatives; costs, diversion of
management’s attention, and potential payments made in connection
with the multiple class action lawsuits a stockholder derivative
lawsuit arising out of our IPO; credit, reputational and
relationship risks of certain of our current and former equity
investments; the dual class structure of our common stock has the
effect of concentrating voting control with certain members of the
Fuller and Quinn families, which limits or precludes the ability of
other stockholders to influence corporate matters; our ability to
maintain effective internal controls without material weaknesses;
and the impact of the recent coronavirus outbreak or other similar
outbreaks. Readers should review and consider these factors along
with the various disclosures by the Company in its press releases,
stockholder reports, and filings with the Securities and Exchange
Commission. We disclaim any obligation to update or revise any
forward-looking statements to reflect actual results or changes in
the factors affecting the forward-looking information.
About U.S. Xpress
Through its subsidiaries, U.S. Xpress Enterprises, Inc. offers
customers over-the-road, dedicated, and brokerage services. Founded
in 1985, the Company utilizes a combination of smart technology, a
modern fleet of tractors and a network of highly trained,
professional drivers to efficiently move freight for a wide variety
of customers. U.S. Xpress implements a range of digital initiatives
and technology to drive innovation in the industry, streamline the
value chain for customers and improve the overall driver
experience.
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version on businesswire.com: https://www.businesswire.com/news/home/20220907006164/en/
Investor Contact Matt Garvie Vice President, Investor
Relations (423)-633-7153 mgarvie@usxpress.com
US Xpress Enterprises (NYSE:USX)
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